Euro markets set for year of VOD

More than 150 platforms now operating in 26 countries

With a spate of new platforms coming online, video-on-demand finally began gaining traction in the past 12 months, and the coming year should see it develop more significant scale in the European entertainment market.

According to Paris-based audiovisual consultancy NPA Conseil, there are now about 150 VOD platforms in 26 European countries (every EU member state plus Switzerland). Such major territories as Germany, France and the U.K. have 20-plus platforms, while some of the smaller territories have only a single indigenous operator.

"Video-on-demand is a bit like the Loch Ness monster. We've talked about it for a long time but it's never showed itself. Well now it's here," French director Jean-Jacques Beineix said at a recent industry forum.

The latest newcomer is Universcine.com, a VOD movie site that claims to offer the widest catalog of local movies in France. It is set to launch commercially at the end of the month.

What's unique about Universcine is that it brings together some 35 independent French producers — including internationally successful outfits like Fidelite Prods., Diaphana and Why Not Prods. — without the involvement of a major distribution company.

The site aims to offer about 300 movies, many of them exclusive, at a cost of about $6 per viewing, the idea being that a larger chunk of this will flow back to the producers if no distribution company is taking a cut.

In a bid to keep track of the plethora of new sites, NPA is finalizing a study of VOD platforms commissioned by the European Audiovisual Observatory and the French government, due to be published in the coming weeks.

"We found that VOD is developing fastest mainly on ADSL platforms," said Valerie Champetier, associate director at NPA. As a result, telecom operators and ISPs are displacing content aggregators as the new central players in the current wave of development.

The rental model — paying for a single viewing of a chosen film — is still the mainstay of the business. "But SVOD (subscription allowing access to a catalog) is what's developing fastest," Champetier said.

"VOD is the single biggest change to cinema since the invention of sound — it's bigger than color, bigger than widescreen. It'll bring a shift in the way in which cinema is going to be consumed," U.K. Film Council CEO John Woodward said.

The challenge for the film industry is how to avoid a situation like that in the music industry, which saw demand plummet because of the slow reaction to online availability and piracy problems.

"The view (on VOD) in the U.K. is really positive," Woodward said. "We believe that, in time, VOD will be a perfect substitute for DVD and pay-per-view."

Woodward reckons that VOD will broaden access to film titles and offer consumers a wider range than DVD and cassette stores have been able to. "Online rental stores like Lovefilm show customers renting a broader range of films than when people go to the video store," he said. "When you have the ability to deliver a wide range to customers, they exercise that choice."

But VOD also poses a threat to existing models. "We can all begin to see the strains on the exhibition sector, DVD and broadcast," Woodward said.

With broadband penetration among the highest in the world at about 60%, the VOD market in the Nordic countries is maturing rapidly, now with some 10 players.

"We have seen volumes increasing several hundred percent," said Henrik Jarl, marketing manager of Stockholm-based VOD provider SF Anytime, which reported more than 150,000 VOD open Internet transactions in 2006. But VOD over ADSL platforms has seen even faster rates of growth.

"The market in Scandinavia has really discovered IPTV via broadband," Jarl said. "IPTV is where we see really big growth in 2007 and also into 2008."

"(The subscription model) will definitely build the VOD market," he says. "The (U.S.) studios have not been keen on the subscription model. They're not keen on mixing their movies (on the same platform), but from the consumers point of view, people don't care if a movie is from Fox or Warner Bros."

NPA has only produced VOD revenue forecasts for the French market, where it estimates the rental market in 2006 to be worth in the region of €17 million ($22.5 million). It forecasts that this will triple in 2007 and reach about $450 million in five years.

"It's the moment of takeoff, notably due to the widespread take-up of triple-play offers (bundling TV, phone and Internet)" NPA managing director Philippe Bailly said.

Marie-Christine Levet, CEO of French ISP Club Internet, de-scribed 2006 as the year VOD "entered the living room." She said ease of use, whereby customers can access a movie from one click on a remote control, is a key driver of adoption. "We're still right at the start, but people are starting to get the taste for it," Levet said.
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